Peruvian Metals (“Peruvian Metals”) has signed a Memorandum of Understanding (“MOU”) with Rio Silver Inc. (“Rio Silver”) to initially establish a small-scale mining operation on the Palta Dorado Au-Ag-Cu Property (“Palta Dorado” or the “Property”) located in the Ancash Mining Department in Northern Peru. The purpose of the MOU is to establish an equal profit sharing agreement between the companies on the sales of the Au-Ag-Cu concentrates. Peruvian Metals will provide space at Peruvian Metals’ 80% owned Aguila Norte Processing Plant (“Aguila Norte or Plant”).
The property covers an area of approximately 1200 hectares and located approximately 120 kilometres southeast of the Plant. Road access to the plant is approximately 180 km’s with about 150 km’s consisting of highway. The property has had limited small scale mining in several small adits and shafts by the previous owner. Both sulphide and oxide mineral extracted from the property was shipped over 1000 kilometres to processing plants in Southern Peru.
Limited surface sampling and mapping around adits and workings has identified several oxide Au-Ag veins hosted in granodioritic rocks. The main working on the property is a fifty-three metre shaft where miners used a hoist to bring mineral to the surface. The mineralized NEE-SWW vein exposed in this main working has been observed over an 800 metre strike length on surface. Surface sampling alone couldn’t determine the grade and width of the mineralized structure due to the oxidation and cover. Samples taken from altered intrusive wallrock returns encouraging anomalous gold results.
The oxide-sulphide transition is clearly exposed in the shaft and occurs at approximately 25 metres below surface. At the initial property visit, approximately forty-five tonnes of mineral in sacks were outside of the main working ready for shipment to Southern Peru. Two composite samples were taken from these sacks and returned an average grade of 26.7 g/t Au, 23.76 oz/t Ag and 3.16% Cu. A third sample ~50 kg was taken and used for metallurgical work. The work was performed by Procesmin Ingenieros Laboratories with a head grade of 23.21 grams/MT Au, 29.04 oz/MT Ag and 4.95% Cu. Metallurgical work showed that two concentrates can be produced. The first and the most value concentrate grades 125.59 grams Au/MT, 4,808 grams Ag /MT and 24.41% Cu with a mineral to concentrate ratio of 7.8 to 1. A second marketable Au-pyrite concentrate was also produced grading 11.46 grams/MT Au, 565 grams Ag/MT and 2.90% Cu having a mineral to concentrate ratio of 2.7. This second concentrate is marketable in Peru and can be sold to traders in order to blend with higher grade arsenic gold concentrates. The overall mineral to concentrate ratio by processing this mineral would be 1:1.
Artisanal workings on a second SEE-NWW structure north of the main working exposed strongly oxidized quartz veins ranging between 30 to 70 centimetres in width. Four samples taken from mineral sacks contained heavily oxidized material ready for shipment ranged from 8.65 g/t to 17.3 g/t averaging 12.4 g/t Au. Silver assays ranged from 42 g/t and 187 g/t averaging 107 g/t Ag. A bottle-roll metallurgical sample with a head grade of 13.0 g/t Au and 102 g/t Ag returned a 92.15% gold and 65% silver recoveries over 36 hours.
The MUO will eventually lead to a 50-50 ownership between Peruvian Metals and Rio Silver in a Peruvian Company (“Joint Venture”). Equal ownership will occur once Peruvian Metals has equally matched Rio Silver’s capital investment in the property of $250,000 US. These capital expenditures will include permitting, property taxes, camp construction, property wide exploration and any infrastructure needed for mining.
The profits on the sale of concentrates will be shared between Rio Silver and Peruvian Metals after operational expenses outlined in the MUO. Operational expenses related to mining will be shared by both companies. Operational expenses will include mining, transportation of mineral and concentrates, support staff, consumable and logistics. Peruvian Metals’ 80% owned Plant will also charge the Joint Venture commercial mineral processing rates as other clients and will be considered as an operational expense.
Peruvian Metals’ will act as the operator of the Joint Venture and be responsible to obtain the small scale permits related to the mining. Peruvian Metals is very experienced in obtaining these permits and expects no serious issues. The Joint Venture has already identified an experienced underground mining who agreed to start the mobilization of the compressors and mining equipment to the site. Small-scale mining can start in the first quarter of 2020. It is expected to initially start between 400 to 600 tonnes per month working on the main workings. More crews will be added to increase production.
Jeffrey Reeder the CEO of Peruvian Metals states: “Our company is excited to jointly develop and explore the prospective Palta Dorado property with Rio Silver. The property has several high grade Au-Ag-Cu veins ready to be exploited and processed at the Aguila Norte Plant. Oxide gold material can be also exploited and sold to a number toll mills for immediate cash flow. Initial development and exploration will consist of drifting along the high grade sulphide veins generating instant cash flow. The mining engineer who has visited the site and agreed to supervise the mining has over 20 years of underground experience and is confident to be able to ship to Aguila Norte 400 to 600 tonnes in the first month of mining.”